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L.N Revathy

Sitting smug in the hotel lobby after handing over your credit card? Keep smiling but stay alert to credit card abuses and tread carefully.

ISN'T it convenient to carry your credit card when on a buying spree than move around with hard cash? Exactly, and this is what most of us do. Whether in buying jewellery or checking out of a hotel, the plastic card comes in handy, rather than currency bundles. In fact, most people boast of more than one card, purportedly as a `status symbol'.

This widely-used payment device, though next only to the cheque, is the most profitable line of business for banks.

From around 60 million Visa and MasterCards in the late 60s, the numbers have risen significantly to cross the trillion-mark in 2000. Retail sales using the Visa card have accounted for 7.6 per cent of the global personal consumer expenditure (PCE). Visa is anticipating a quantum jump in PCE in the next couple of years.

The virtual explosion of credit cards, however, is not without problems. As money and security become more digital and are transmitted across more devices, channels and borders, the security of the transaction becomes increasingly critical.

Recently, a customer purchased jewels worth Rs 80,000 and offered the plastic card for payment. On verification, it was found to be a fake card. Before he could be nabbed, he quietly slipped from the shop leaving behind the jewellery and the card. This is not an isolated case.

Peril in the air

Industry sources recall intriguing instances. Consider this: You are checking out of a hotel, and decide to settle your dues with your credit card. You hand the card to the bearer, who brings it back with the charge slip.

Have you ever paused to think what frauds could have taken place in the meantime? Your card could have been swiped more than once (manually), your data could have been captured and passed on, the card could have been altered... so many things can happen in a matter of a few minutes and they are not unknown.

Yet, the cardholder blindly signs the charge slip and walks away, only to find some discrepancy in his statement at a later date.

Till this date, no foolproof method has been established to clamp down on such manipulations, as even the most sophisticated fraud-control systems or neural networks depend on the integrity and carefulness of the people who use them. As simple as that!

Huge sums have been spent on the automation of authorisation and monitoring systems and electronic data capture at the point of sale to deter scams, but the manual swiping machine continues to exist.

Criminals are known to be continually scheming for ways to beat the system.

They counterfeit and alter cards; dishonest merchants find ways to defraud banks by creating false drafts on real cardholder account numbers, submit bogus applications or application information to an issuer with the intention of establishing a credit line and obtaining credit cards for fraudulent use. Considering the number of applications processed by issuers every month, detecting fraudulent applications could be difficult.

Issuers have, however, clamped down on it significantly by cross-verifying the applicant's details using access to the Clearing House database. Industry sources say that more than 70 per cent of the cardholders paid just the minimum outstanding due every month, but continued to utilise the card up to the maximum permissible limit. Further, they did not document the transactions, which could be proof of evidence in the event of a dispute.

Despite authorities incorporating various security features to prevent a scam, fraudulent transactions continue to take place.

Two key challenges in a digital payment environment are - to extend the same security that exists in a physical world to virtual transaction and ensure privacy to users. The security concerns have mushroomed over the years.

According to an Accenture survey, Visa has, over the past three decades, developed new security tools and processes to protect the integrity of electronic payments.

As a result, the losses due to fraud are said to be less than one-tenth of one per cent of the global sales volume (which has crossed the trillion-dollar mark).

In a recent move, the UK banking industry has moved forward with a chip and pin technology to combat spiralling credit card frauds.In spite of all these measures, reports show that the circulation of fake or counterfeit cards has been on the rise in the UK.

The banking industry's survey showed that the fraud reached £425 million last year and was estimated at £800 million by 2005, mostly due to counterfeit or fake cards in circulation.When you hold out your card next time, bear in mind that a plastic card is worth more than money within the context of card abuse.

lnr@thehindu.co.in

Picture by Parth Sanyal

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